Tax Deduction For Political Contributions

Don’t you just love paying for attack ads? I know I do! We’ll the good news is that there is bi-partisan support for one thing in Canada these days, and that is political donations. I always knew that there was a tax deduction for political contributions available in Canada, but I wasn’t sure just what incentives it included. The reality was very interesting to me when I looked it up.

The non-refundable tax credit (meaning that you need to have sufficient federal tax payable on your yearly return in order to claim the credit, otherwise you cannot carry it forward) that is provided when you donate to support a political party in Canada is up to 75% on the first $400 of donations! That is crazy to me. We are essentially paying off our political parties with our own tax dollars. If you go over $400, from $400-$750 is a 50% tax credit, and from $750-$1175 is 33.3%. To sum it up, if you gave $1175 donation to your political party of choice, you would get a $300 tax credit on the first 400, $175 on the next $350, and then a final $175 on the last $525, for a grand total of $650.

How To Claim Your Political Donation Tax Credit

The mechanics behind claiming your tax deduction for political contributions is for the political party to issue an official receipt. Only direct monetary donations will be considered for the tax credit. Volunteer work for political campaigns is not considered a true donation, and no credit will be given for this sort of donation. In order to claim this credit the usual restrictions apply. You must be a citizen or permanent resident of Canada, and as of 2007 corporations have not been allowed to make political contributions in Canada (you hear that big brother in the USA!). A couple can make two separate political donations in order to maximize their tax savings.

Who Says Bi-Partisanship is Dead?

I found it to be very curious that we give such large tax breaks to people who donate to political parties. When compared to other, more worthy donations, it actually leaves a bitter taste in my mouth. Charitable donations for example are given a tax credit equivalent to the same percentage as the lowest marginal tax rate up to $200 and for the highest marginal tax rate on any amount over $200. Even at the highest marginal tax rate, your tax credit is only between 40% and 50%. Does is strike anyone else as semi-insane that we give people a bigger incentive to donate to massive political parties than we do to charities? I guess the media industry are the real winners here since a large portion of that money will end up going towards big media buys anyway.

Is there something morally wrong with giving such a massive tax deduction for political contributions? It’s not as if it privileges one party over the others (although you could make the argument that since the Conservatives have positioned themselves as the party that looks out for the interests if high-income Canadians, they have an advantage in that regard). I just can’t shake the fact that it feels a little slimy when donating to a guy in a suit whose face is on TV and in the papers gets you more money back than donating to the Salvation Army, Canadian Cancer Society, and/or the Red Cross. If you really feel so strongly about one party in the political system over the others, then shouldn’t you be able to donate without such a huge incentive to do so? What are the pros to having that strong an incentive to donate anyway?

Is Super PAC One of Those Avenger Guys?

I guess it could be worse. Look at the completely boondoggle that the American political scene has turned into since its Supreme Court has allowed corporations to operate as citizens within the political sphere (the infamous corporations are people quotes will one day be looked back on with pride… right?). This has generated the formation of huge “Super PACs” – Super Political Action Committee. The whole thing has quickly spiraled out of control to the point where everyone knows that the system is completely broken (including members from both sides of the aisle) yet everyone is scared that if they try to fix it, their political funding will dry up.

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